Ocado's losses widen despite sales increase

The average order size at Ocado is now £114.90

Online supermarket Ocado has seen its losses widen despite increasing sales.

The firm reported a loss of £3.8m for the 24 weeks to 19 May due to costs linked to its distribution deal with supermarket chain Morrisons and the opening of new warehouses.

However, sales rose 15.6% to £355.9m, with the average order size up 1.6% to £114.90.

Ocado chief executive Tim Steiner said it had been an "extremely busy" first half of the year.

"We remain well placed to take advantage of the accelerating structural changes in the industry," he added.

Ocado now has 360,000 customers and said the rate at which it was acquiring new customers was up 50% for the period compared with last year.

The firm opened its first non-food distribution centre in Hertfordshire in the period, which it said would enable it to take advantage of the rising number of customers purchasing items other than food.

It also opened its second warehouse in Warwickshire, which it will use mainly to fulfil its joint venture deal with Morrisons.

In May, Morrisons announced a deal with Ocado that it said would enable it to launch an online grocery service by January 2014. Delivery vans will carry the Morrisons brand, with logistical support from Ocado.

Profits question

Ocado was set up in 2000 by three former Goldman Sachs bankers and has yet to report an annual pre-tax profit.

In May, the former Marks and Spencer boss, Sir Stuart Rose, was appointed as its chairman.

Shares in Ocado fell almost 6% to 295p following the latest update, but still remain well above the 180p price that the shares floated at in July 2010. The shares have more than quadrupled over the past year.

Matt Piner, research director at Conlumino, said despite Ocado's growing popularity with shoppers, concerns over its business model remained.

"Doubts still remain that it will ever achieve significant profitability as a standalone business," he added.

Shore Capital analyst Clive Black said: "This remains a business that continues to be valued on unsubstantiated potential rather than cash flows with high visibility."